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[2011] ZAGPPHC 18
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Potter v Affleck (12989/2004) [2011] ZAGPPHC 18 (11 February 2011)
IN
THE HIGH COURT OF SOUTH AFRICA
(NORTH
GAUTENG HIGH COURT, PRETORIA)
CASE
NO: 12989/2004
DATE:
11/02/2011
In
the matter between:
ANDREW
RONALD
POTTER
.............................................................................
Applicant
and
RICHARD
DOUGLAS
AFFLECK
.......................................................................
Respondent
JUDGMENT
MNGQIBISA-THUSI,
J:
[1]
This is an application in terms of which the applicant is seeking the
following order:
1.1
that
the default judgment granted against the applicant on 10 May 2010 be
rescinded;
1.2
that
the warrant of attachment and execution of the applicant's movable
property and the subsequent writ of execution and the sale
in
execution, if any.
[2]
The applicant and the respondent were members in three close
corporations, namely, Greenland Engineering CC trading as Greenland
Engineering; Greenmat Investments CC and Greenland
Precision Engineering CC. Each held a 50 per cent member's interest
in each of the entities.
[3]
On 22 October 2003 the applicant and the respondent concluded a
written agreement ("sale agreement") in terms
of which the
respondent sold his 50 per cent interest in each of the entities. In
terms of the sale agreement the three entities
were collectively
referred to as the close corporation. The agreed purchase for the
close corporation was R480 000,00 (clause
1). [4] Further, the
sale agreement provided, inter alia, the following: 5.1 The
purchase price would be payable as follows:
5.1.1
R20
000,00 on or before 30 November 2003 and thereafter in equal
instalments of R20 000,00 per month payable on or before the 7
th
of each successive month (clause 2.1);
5.1.2
The
purchaser acknowledges that he requires no warranties regarding the
membership interest in the close corporation purchased.
The purchaser
however warrants in favour of the seller that all the movable assets
of Greenland Engineering CC will not be encumbered
in any way further
until the full amount due and payable to the seller has been paid,
{"clause 2.1) ("clause 2.1)
5.1.3
The parties specifically agree that should the close corporation be
liquidated for any reason and the purchaser receive any
credit
dividend from the liquidator that the credit dividend will be paid
over to the seller to cover any outstanding amount due
and payable to
the seller. If the close corporation however is liquidated and there
is no credit dividend payable to the purchaser,
the parties
specifically agree that the purchaser will not be liable to the
seller for any payment in terms of this agreement,
and the parties
specifically agree that the seller will have no further claim against
the purchaser (clause16).
[5]
As a result of financial difficulties the applicant allegedly
experienced after taking over the close corporation, he liquidated
Greenland Engineering CC. In his founding affidavit the applicant
contends that after Greenland Engineering was liquidated and
since
the liabilities of the close corporation exceeded its assets, no
dividend was payable from the proceeds of the liquidation
of the
close corporation. Further that there was a shortfall and an amount
of R201 586.17 is still owed to the Standard Bank. It
is not clear
from the applicant's founding affidavit where he refers to the close
corporation whether he is referring to Greenland
Engineering or to
the three entities which were the subject-matter of the agreement of
sale in which they are collectively referred
to as the close
corporation.
[6]
On 2 May 2006 the respondent issued summons against the applicant
claiming an amount of R420 000,00, being the balance after
the
applicant had paid only three instalments towards the purchase price.
The applicant filed his plea and the matter was set-down
for hearing
on 8 July 2008. However the hearing was postponed twice at the
instance of the applicant. On the granting of the last
postponement
the parties were also granted the right to
ask for a preferential date. This was granted and the matter was
set-down for 10 May 2010. The notice of set-down was served on
the
applicant personally on the applicant on 15 March 2010. However, the
applicant was not at court nor was he represented. Applicant
alleges
that he had sent a letter to the Deputy Judge President indicating
his inability to attend court as he could not afford
legal costs. A
default judgment was granted, ordering the applicant to pay the
respondent the amount owing plus costs on an attorney
and client
scale.
[7]
In support of his application for the rescission of the judgment of
10 May 2010, the applicant submits that he was unable to
attend court
for two reasons. Firstly, that his girlfriend was very sick and he
had to attend to her. As a result he was emotionally
stressed and
financially drained as he had to care and support his girlfriend 'and
also pay for her medical bills. He could therefore
not afford to
obtain the services of a lawyer. He contends that he was not in
wilful default as it has always been his intention
to defend the
action brought against him by the respondent and had also he had
alerted the DJP of his non-attendance and had requested
a
postponement. [8] The applicant further submits that he has a bona
fide defence against the respondent's action in that at the
time he
took control of the close corporation, its liabilities exceeded its
assets. As a result after a few moths he had no choice
but to
liquidate the close corporation. As indicated in paragraph 5 above,
the applicant when making reference to the close corporation
in his
founding papers does not seem to distinguish between Greenfield
Engineering, the liquidated entity and that three entities
collectively referred to in the sale agreement as the close
corporation particularly as he is
basing his defence on one of the clauses in the sale agreement. As
his defence the applicant is relying on clause 16 of the sale
agreement the portion of which reads as follows:
If
the close corporation however is liquidated and there is no credit
dividend payable to the purchaser, the parties specifically
agree
that the purchaser will not be liable to the seller for any payment
in terms of this agreement, and the parties specifically
agree that
the seller will have no further claim against the purchaser."
[9]
It was submitted on behalf of the respondent that the application for
the rescission of the judgment of 10 May 2010 should be
dismissed in
that the applicant was in wilful default since he was aware of the
date the matter in the main action was set down
and had elected not
to appear in court. Further that the applicant had no bona fide
defence to the respondent's claim as the clause
(16) on which the
applicant was relying as his defence is applicable only in the event
that the close corporation as defined in
the agreement of sale was
liquidated. Since the applicant had only liquidated one of the
entities making up the close corporation
and the other two were still
trading, the applicant could not claim that he was no longer liable
to pay the respondent the balance
of the purchase price for the three
close corporations sold to him.
[10]
It was further submitted by the respondent that it had come to his
knowledge that on 24 November 2004 the applicant had sold
the
property of Greenmat Investments CC (Greenmat Investments) for an
amount of R750 000,00 to an entity known as NJC Engineering
Services
CC. It appears that Greenmat Investments was the only entity amongst
the collective close corporation which owned property.
[11]
The Applicant has not filed a replying affidavit and the allegations
made by the respondent in his answering affidavit therefore
stand as
undisputed.
[12]
Under the common law, in order for the court to grant an order
rescinding a previous order or judgment the applicant has to
show
sufficient cause. In other words the applicant must give a reasonable
explanation for his default, must show that he has a
bona fide
defence and must also show that he has a bona fide defence which
prima facie has some prospect of success.
Chetty
v Law Society, Transvaal
1985
(2) SA 756
(A) at 765.
[13]
The applicant has given an explanation for his default in that
although he had every intention to defend the claim against
him, he
was not in a mental state to attend court since he was emotionally
strained as a result of his girlfriend's illness and
the support he
had to give him and was also financially compromised due to payment
of the girlfriend's medical bills. I am prepared
to give him the
benefit of the doubt that he was not wilful in not attending court
particularly because he had taken steps to inform
the DJP of his
inability to come to court and had requested for a postponement.
However, I am of the view that the applicant has
not shown that he
has a bona fide defence against the respondent's claim which prima
facie has some prospect of success. In terms
of the agreement between
the applicant and the respondent, the applicant would not have been
liable to pay the respondent anything
had the close corporation as
defined in the agreement of sale been liquidated. This means that the
applicant would have been absolved
had all three close corporations
making up the close corporation as defined been liquidate. The
applicant in his founding papers
does not explain what the position
of the other two close corporations, Greenmat Investments and
Greenland Precision Engineering
CC is. Further, he does not answer to
the allegations that he has sold the property of Greenmat
Investments, and if he has, what
he has done with the proceeds
thereof.
[14]
The applicant has clearly not discharged the onus of showing that he
has a bona fide defence which, prima facie, carries some
prospect of
success.
[15]
Accordingly the following order is made:
15.1
The application for the rescission of the judgment granted on 10
May 2010 and ancillary relief is dismissed with costs.
MNGQJBISA-THUSI
J
JUDGE
OF THE NORTH GAUTENG HIGH COURT